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This study examines the influence of psychological biases on investment decision-making through the lens of behavioral finance, challenging the traditional assumption of investor rationality. By integrating psychological insights with economic principles, the research investigates how cognitive biases such as loss aversion, overconfidence, and herd behavior along with emotional factors, distort rational financial choices, leading to market inefficiencies and suboptimal outcomes. Employing a mixed-method approach, the study combines qualitative insights from interviews with financial experts and quantitative data from a survey of 398 retail investors in Jammu and Kashmir. The findings reveal the significant role these biases play in shaping risk perceptions, portfolio management, and market volatility. Furthermore, the research proposes practical strategies, including structured decision-making frameworks, professional guidance, and emerging technologies like AI, to mitigate the adverse effects of irrational behavior. By highlighting the interplay between human psychology and financial decision-making, this study contributes to a deeper understanding of investor behavior and offers actionable insights for improving investment performance in dynamic market environments.